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List the things you think you would need to
have in a contract for it to be valid.
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Describe a contract that you have been in, or
one that you have heard about. What made it
a contract?
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What we have done: Constitutional Law,
Criminal Law, Civil Law-Torts.
Today: The elements and classes of contracts
This Unit: Entering into Contracts, Fraud and
Misrepresentation of Contracts, Contractual
Capacity
What to look forward to: Jerry Springer,
Judge Judy, Jeopardy Re-Match, Field Trip to
U of D Mercy January 18th
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SWBAT describe the 6 elements to make a
contract
SWBAT differentiate between the major
classes of contracts
SWBAT know when and how a contract
legally comes into existence
SWBAT know how an offer can come to an
end
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Contracts pervade our life! In order to move
on with business law content we must first
know and the nature, purpose, and effect of
contracts
Understand contract law is necessary to
understand the law of sales, consumer law,
agency law, property law, employment law,
corporate law, computer law, and much more
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Raise your hand if you think you are currently subject to any contract
agreements
NOT SURE??
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Are you a current party to:
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A credit card agreement?
A grocery story “club” card agreement?
A library member?
An agreement to sell something to a friend for money?
An agreement to buy something from a friend for money?
A movie rental agreement
Any form of signed agreement relating to a job?
A book contract for a class?
An agreement for senior dues?
A private email account?
If yes, you may be a party to a binding legal contract… if you are over 18
(we’ll talk about how age matters in a bit)
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Offer: Showing a willingness to enter into a
bargain in such a way that another person
would interpret that they could accept and it
would conclude the negotiations.
Can be through words or actions.
Advertisements can be offers.
Negotiations are not offers. Buyers have to
be able to walk away from estimates or price
quotes.
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Definition: any agreement enforceable by
law
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Contracts must have six elements in order for
the contract to be legally binding! Let’s find
out what they are…
Offer- a proposal made by one party (the
offeror) to another party (the offeree)
indicating a willingness to enter a contract
2. Acceptance- the agreement of the offeree
to be bound by the terms of the offer
Does this scenario satisfy the first 2 elements?
1.
Hey Joe, I offer to sell you my I-pod
If not, what do we need to add?
3. Genuine Agreement- Offer and acceptance
MUST come together to create genuine
agreement, or a “meeting of the mind”.
 Agreement can be destroyed by:
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Fraud
Misrepresentation
Duress
Mistake
Undue Influence – I’ll go over these in detail later
on in the unit…
Consideration- The exchange of things of value.
4.
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This mutual exchange binds the parties together
Capacity- The legal ability to enter into a contract.
5.
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Groups who are usually excluded
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Minors
Mentally Incompetent
Drugged or drunk individuals
Legality- People cannot enter a contract that
involves illegal acts-
6.
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For example: I can’t sue you for not setting my ex’s
house on fire even though I paid you $1000 to do so.
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Contracts can be created in different ways
and can assume diverse forms. A contract
can be described by ANY of the following
characteristics:
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Valid, void, voidable, or unenforceable
Express or implied
Bilateral or unilateral
Oral or written
Let’s take a look at what these actually mean.
Valid: legally good, legally binding
Void: no legal effect (it could be missing one of the
6 elements)
 Voidable contract: when a party to a contract is
able to void or cancel a contract for some LEGAL
reason (ex: a contract between 2 minors can be
voidable by either of them)
 Unenforceable contract: a contract that the court
will not uphold, generally b/c of some rule of law,
such as the statute of limitations
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Express contract: is stated in words and may
be either oral or written
Implied contract: comes about from the
actions of the parties.
 People often enter into implied contracts without
even exchanging one word
 Example: If I pull up to the gas station and start
pumping gas, the implied contract is that I will pay
for that gas.
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Bilateral contract: contains two promises. One
party promises to do something in exchange for the
other’s promise to do something else.
 An act performed at request
 Ex: if a friend says “I’ll sell you my old I-Phone for $50”, and
you say “I’ll buy it”., a bilateral contract comes into
existence
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Unilateral contract: A promise by only one person
to do something , if and when the other party
performs some act
 A promise made
 Ex: A reward
 Ex: I will sell you my I-phone IF you give me the case
before noon tomorrow
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Oral contract: A contract can be created by
word of mouth and comes into existence
when two or more people form a contract by
speaking to each other
 One person usually offers to do something, and
the other party agrees to do something else in
return
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Written contract: this assures both parties
know the exact terms of the contract and also
provides PROOF that the agreement was
made (we will discuss which contracts MUST be in writing at a later
date)
Offeror- person making the offer
Offeree- person who receives the offer
An offer has 3 basic requirements. It must be:
1. Made seriously
2. Definite and certain
3. Communicated to the offeree
Let’s find out about these…
1.
2.
3.
Serious intent: An offer MUST be made with the
intention of entering into a legal obligation (An
offer made in the heat of an argument or a joke
would NOT meet this requirement)
Definite and Certain: an offer must be definite
and certain to be enforceable (If I said I’d provide a
“some” of something, who’s to say what that
some is?
Communication to the offeree- phone, email,
etc.
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The second element of a legally binding
contract is acceptance of the offer by the
offeree. As is the case of the offer, certain
basic requirements must be met:
 The acceptance must be unconditional
 The acceptance must follow the rules regarding
the method of acceptance
Unconditional Acceptance: The acceptance must
not change the terms of the original offer in any
way. Unless… there is a:
1.
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Counteroffer: In a counteroffer, the original offeror is
not obligated to go along, and no contract results.
Instead, the offeror becomes an offeree and may accept
or reject the counteroffer
Methods of Acceptance: the time at which an
acceptance takes place is important b/c that is
when it comes into existence
2.
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Face to face or telephone- at that time
Separated by distance- an acceptance that must be sent
over long distances is effective when it is SENT.
1.
2.
3.
4.
5.
Revocation- the taking back of an offer by the
offeror. This MUST be done before an acceptance
of the offer
Rejection- refusal of an offer by the offeree
Counteroffer- ends the first offer
Expiration of time- if a time limit is set, the
acceptance must be made within that time
Death or insanity- if the offeror dies or become
insane before the offer is accepted, the offer
comes to an end (this is an offer, not a contract)
Contracts occur all day long and we don’t even realize
it. Let’s look at some examples. At the end of the
clip, be ready to tell me if there is an (1) offer and an
(2) acceptance
Hardcore Pawn: Deals on the Bus
Hardcore Pawn: Weird Tan Lady
Real case: If you give someone an engagement ring
and the engagement is broken, is the person who
received the ring legally binded to give the ring
back?
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Discuss whether there was a valid offer and
acceptance with your group.
Explain your answers on your handout. 8
minutes.
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1. Ever-tite v. Green- The court ordered that
the homeowner pay for transporting the
materials, but not for the roofing itself.
2. Ciaramella v. RDA Since the settlement
was just an outline and there were uncertain
terms, the court did not enforce it.
3. Carlil v. Carbonic Smoke Ball- The company
did not say the person had to notify of
acceptance, so the person’s performance was
enough.
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Think-Pair-Share
Read the fact pattern on your work sheet to
yourself, then spend about 3 minutes
explaining whether you think one party
breached the contract, and what the court
should do, if anything.
Then, you will share with your group for
about 5 minutes.
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Hawkins v. McGee- The court said that you
can recover damages for the difference
between what you expected to get in the
contract and what you actually got.
In this case, Sam would be able to recover the
difference in value between a good hand and
a hairy hand.
Doctors and lawyers would work together to
determine that value.
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Practice- Have one member of your table
read the following facts out loud, then discuss
whether the contract should be declared void
for any of the reasons discussed above. 5
minutes.
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Discuss the issues, but you are not required to
write them down. We will hear each group’s
opinion at the end of 5 minutes.
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We will divide into 6 groups. You will have the
rest of class to draft a contract.
Each group will get a sample contract, a fact
pattern, and will have the choice to draft
either an oral or written contract.
For an oral contract, write a dialogue
between the parties that would create a valid
contract.
For a written contract, use the sample written
contract for suggestions.